What Is A Crowdsourcing Business Model? The Crowdsourcing Business Model In A Nutshell

The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Aspect	Explanation
Crowdsourcing Business Model	Crowdsourcing is a business model that leverages the collective intelligence, skills, and contributions of a diverse group of individuals or a “crowd” to solve problems, generate ideas, fund projects, or complete tasks. It offers various benefits, including cost-efficiency, innovation, and scalability.
Types of Crowdsourcing	Crowdsourcing can take several forms, including Crowdfunding (raising funds from a crowd), Crowdsolving (solving complex problems), Crowdvoting (collecting opinions or votes), Crowdcollaboration (collaborating on projects), and more.
Open vs. Closed Crowdsourcing	Open crowdsourcing involves engaging a broad and open community of participants, while closed crowdsourcing limits participation to a specific group or platform users. The choice depends on the goals and nature of the project.
Examples of Crowdsourcing	Prominent examples include Kickstarter (crowdfunding for creative projects), Wikipedia (crowdsourced encyclopedia), InnoCentive (solving scientific challenges), and Amazon Mechanical Turk (crowdsourced microtasks).
Benefits	– Cost-Effective: Crowdsourcing can be more cost-effective than traditional methods. – Innovation: It fosters innovation by tapping into a diverse pool of ideas. – Scalability: Projects can scale easily with the participation of a large crowd. – Speed: Tasks can be completed quickly.
Challenges	– Quality Control: Ensuring the quality of contributions can be challenging. – Intellectual Property: Managing ownership and rights can be complex. – Crowdsourcing Fatigue: Contributors may experience burnout. – Privacy and Security: Data security concerns must be addressed.
Management and Moderation	Effective management and moderation are crucial for successful crowdsourcing initiatives. This includes setting clear goals, providing guidelines, monitoring contributions, and offering rewards or recognition.
Use Cases	Crowdsourcing is used in various industries, such as technology, healthcare, research, and entertainment. It can fund startups, gather scientific research, improve software, and even solve complex global challenges.
Future Trends	The future of crowdsourcing may involve AI-driven curation, blockchain for trust and transparency, and greater integration into businesses’ core strategies. As technology evolves, crowdsourcing will continue to play a vital role in innovation and problem-solving.

Table of Contents

Understanding crowdsourcing

Essentially, crowdsourcing describes the process of collecting input from a large group of people. This group of people is a third-party unrelated to the business seeking results and usually performs the necessary tasks on a voluntary basis.

Consumer reviews on a product or service represent the most basic form of crowdsourcing, with freelancing sites and knowledge repositories such as Wikipedia owing much of their success to the collective power of people.

However, the strategy is also used in more complex scenarios where engineering, scientific, or other technical expertise is required. Businesses also use social media platforms like Twitter, Facebook, and Instagram to crowdsource new ideas for products and services.

Crowdsourcing types

Crowdsourcing is an industry experiencing rapid growth and innovation, with the chosen approach depending on the outcome the business desires.

With that said, here is a look at three crowdsourcing types:

Crowdfunding

Where large groups of people come together to fund a project. SeedInvest Technology is a popular platform for start-ups, while creative professionals looking to raise money prefer Patreon.

Crowd-wisdom

Where companies seek out the collective opinion of a group of people on a variety of topics, including election outcome predictions and investor behavior on the stock market. Crowd-wisdom is based on the idea that large groups of people are collectively smarter than individual experts in terms of problem-solving, decision-making, innovation, and prediction. Examples of platforms include Quora, Reddit, and Stack Exchange.

Micro-tasking

Where a large project is separated into smaller tasks for completion by a crowd. Starbucks employed micro-tasking when it asked fans to design a new motif for its coffee cups. Amazon’s Mechanical Turk is another example of a micro-tasking platform.

Benefits of crowdsourcing

For organizations, there are many obvious and not-so-obvious crowdsourcing benefits. We have listed a few of these below:

Scalability

A problem many businesses face when trying to scale is a lack of adequate resources. Crowdsourcing enables the business to cut costs by farming out small portions of the project to remote workers who offer more attractive rates. In some cases, the work may even be done for free.

Addresses knowledge gaps

Crowdsourcing is also used to fill knowledge gaps quickly and easily. There is no need for the organization to undertake a costly and time-consuming recruitment process.

Reduces operational costs – businesses can also reduce or avoid many of the overhead costs of hiring skilled or unskilled labor. These costs include employee salaries, benefits, and training. Crowdsourcing may also obviate the need for a dedicated workspace and associated equipment and utility costs.

Better consumer engagement

When a group of people is energized and motivated to work collaboratively or share their opinion, they tend to be more engaged in the task at hand. With consumer attention spans now lasting a mere eight seconds, participating in the crowdsourcing process is likely to hold their attention for longer than a traditional marketing strategy might.

Case Studies

Threadless T-shirts:
- Problem: Designing trendy T-shirts that resonate with the younger generation.
- Crowdsourcing Solution: Threadless allowed users to submit their T-shirt designs, and the community voted on their favorites. The winning designs were then produced and sold.
NASA Planet Hunters:
- Problem: The vast amount of data from space that needed analysis.
- Crowdsourcing Solution: NASA launched the ‘Planet Hunters’ initiative, enlisting the help of the public to identify new planets from the data collected by the Kepler space telescope.
Duolingo Language Translation:
- Problem: Translating the internet’s content into multiple languages.
- Crowdsourcing Solution: Duolingo offers a free language learning platform. As users progress, they help translate websites and other content into the language they are learning.
LEGO Ideas:
- Problem: Coming up with innovative LEGO set designs.
- Crowdsourcing Solution: LEGO Ideas allows fans to submit their designs. If a design receives enough community support, it might be turned into an official LEGO set.
Waze Traffic Updates:
- Problem: Providing real-time traffic updates and road conditions.
- Crowdsourcing Solution: Waze app users share real-time traffic and road information, helping others to get driving directions based on current conditions.
Minecraft Game Development:
- Problem: Continual development and introduction of new features to the game.
- Crowdsourcing Solution: Minecraft regularly incorporates user-generated content and mods into the official game, keeping it fresh and updated.
My Starbucks Idea:
- Problem: Innovation in products, services, and experience.
- Crowdsourcing Solution: Starbucks set up “My Starbucks Idea” platform for customers to submit ideas, which are then voted on by the community. Popular ideas are implemented in stores.
Foldit – Protein Folding Game:
- Problem: Understanding protein structures and their folding patterns.
- Crowdsourcing Solution: Scientists created a game called Foldit, allowing players to help with predicting the structure of protein molecules. Some discoveries made by players have even led to scientific breakthroughs.
reCAPTCHA – Digitizing Books:
- Problem: Digitizing old books and newspapers with words that computer OCR might not recognize.
- Crowdsourcing Solution: reCAPTCHA shows words that couldn’t be identified by OCR to users across the internet when they verify they’re not robots. By doing so, they help digitize content.
Local Motors – Car Design:
- Problem: Designing innovative vehicles.
- Crowdsourcing Solution: Local Motors runs competitions where the community can submit vehicle designs. Winning designs might be developed into real vehicles.

Key takeaways:

Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. Information is submitted via social media, smartphone apps, or dedicated crowdsourcing platforms
Crowdsourcing types include crowdfunding, crowd-wisdom, and micro-tasking, with each type resulting in a different outcome for the business.
Crowdsourcing helps organizations scale because the work is performed by remote employees or in some cases, voluntarily. The strategy also addresses knowledge gaps, reduces operational costs, and increases consumer engagement.

Key Highlights

Definition: Crowdsourcing is the process of collecting input, knowledge, goods, services, or opinions from a large group of people, usually on a voluntary basis, through social media, smartphone apps, or dedicated crowdsourcing platforms.
Origin: The term “crowdsourcing” was coined by Jeff Howe in a 2006 Wired Magazine article, and it gained prominence with the rise of eCommerce, social media, and smartphone culture.
Examples: Crowdsourcing is commonly seen in consumer reviews, freelancing sites, and knowledge repositories like Wikipedia. It is also used in more complex scenarios requiring technical expertise or to seek ideas for new products and services through social media platforms.
Crowdsourcing Types:
- Crowdfunding: Large groups of people come together to fund a project on platforms like SeedInvest and Patreon.
- Crowd-wisdom: Companies seek collective opinions on various topics using platforms such as Quora, Reddit, and Stack Exchange.
- Micro-tasking: Large projects are divided into smaller tasks for completion by a crowd, seen on platforms like Amazon’s Mechanical Turk.
Benefits:
- Scalability: Businesses can cut costs by outsourcing small portions of projects to remote workers or volunteers.
- Knowledge Gap Filling: Crowdsourcing quickly fills knowledge gaps without extensive recruitment processes.
- Operational Cost Reduction: Overhead costs like salaries, benefits, and workspace can be reduced or avoided.
- Better Consumer Engagement: Engaged and motivated participants provide more attention and feedback compared to traditional marketing.

Related Concepts	Description	When to Apply
Crowdsourcing	Crowdsourcing involves outsourcing tasks, projects, or ideas to a large group of people or an online community, typically via an open call. It harnesses the collective intelligence, skills, and resources of a diverse crowd to solve problems, generate ideas, or complete tasks more efficiently and cost-effectively than traditional methods.	– Idea Generation: Use crowdsourcing to gather diverse perspectives and innovative ideas for product development, marketing campaigns, or business strategies. – Problem Solving: Leverage the collective intelligence of the crowd to tackle complex challenges or find creative solutions to specific problems faced by your organization. – Content Creation: Engage users to create user-generated content, such as reviews, testimonials, or multimedia assets, to enhance brand visibility and credibility. – Data Collection: Tap into the crowd to collect and analyze large datasets for research, market analysis, or trend forecasting purposes. – Product Testing: Involve consumers in product testing and feedback processes to validate product features, usability, and performance before launch.
Open Innovation	Open Innovation embraces external collaboration and knowledge-sharing to drive innovation and business growth. It intersects with crowdsourcing by leveraging external expertise and insights to accelerate idea generation, product development, and problem-solving initiatives.	– Collaborative Research: Partner with external organizations, research institutions, or individuals to co-create new technologies, products, or solutions. – Industry Challenges: Host open innovation challenges or competitions to invite external participants to solve specific industry or business challenges. – Startup Acceleration: Establish incubator or accelerator programs to support startups and entrepreneurs in developing innovative products or services with the help of mentors, experts, and resources. – Community Engagement: Foster a culture of open innovation by engaging employees, customers, and external stakeholders in idea-sharing and collaboration initiatives. – Technology Licensing: License or acquire external technologies, patents, or intellectual property to complement internal R&D efforts and accelerate innovation cycles.
Crowdfunding	Crowdfunding enables individuals or organizations to raise funds for projects, ventures, or initiatives by soliciting small contributions from a large number of people, typically through online platforms. It aligns with crowdsourcing by leveraging collective support and financial backing to bring ideas to life or fuel entrepreneurial endeavors.	– Project Funding: Launch crowdfunding campaigns to raise capital for creative projects, artistic endeavors, or community initiatives without relying on traditional financing sources. – Product Pre-Sales: Offer early access or exclusive rewards to backers in exchange for pre-orders or pledges to fund product development or production costs. – Social Causes: Rally supporters and donors around charitable causes, social impact projects, or disaster relief efforts to mobilize resources and make a positive difference in communities or society at large. – Startup Validation: Validate market demand and investor interest by gauging public interest and financial backing for new business ideas, products, or prototypes through crowdfunding campaigns. – Event Sponsorship: Secure sponsorship or funding for events, conferences, or creative performances by offering sponsor perks or recognition to backers.
Citizen Science	Citizen Science engages members of the public in scientific research or data collection initiatives to contribute to scientific discovery, environmental monitoring, or conservation efforts. It intersects with crowdsourcing by enlisting the help of volunteers to collect, analyze, or interpret data on a large scale.	– Environmental Monitoring: Mobilize citizen scientists to track changes in biodiversity, air quality, water pollution, or climate patterns to support environmental research and conservation projects. – Health Research: Crowdsource health data, patient outcomes, or disease prevalence information from individuals or communities to advance medical research, public health initiatives, or epidemiological studies. – Space Exploration: Involve amateur astronomers, space enthusiasts, or citizen scientists in astronomical observations, celestial mapping, or asteroid tracking efforts to contribute to space exploration and discovery. – Community Mapping: Collaborate with local residents or volunteers to map ecological habitats, urban landscapes, or archaeological sites using geographic information systems (GIS) technology for urban planning, land management, or heritage preservation purposes. – Education and Outreach: Offer educational programs, workshops, or citizen science projects to engage students, educators, or the general public in hands-on learning experiences and scientific inquiry.
Crowdtesting	Crowdtesting employs a distributed network of testers or users to evaluate software applications, websites, or digital products across various devices, platforms, and environments. It complements traditional testing methods by leveraging the diversity and scalability of the crowd to identify bugs, usability issues, or performance bottlenecks.	– Quality Assurance: Augment internal QA processes with crowdtesting to uncover bugs, glitches, or compatibility issues across different devices, browsers, or operating systems. – Usability Testing: Solicit feedback from real users to assess user interface design, navigation flow, and overall user experience to optimize product usability and accessibility. – Localization Testing: Validate linguistic and cultural aspects of software localization or internationalization efforts by engaging testers from diverse regions or language backgrounds to ensure linguistic accuracy and cultural relevance. – Regression Testing: Conduct periodic regression testing cycles to validate software updates, patches, or feature enhancements while minimizing the risk of introducing new bugs or regressions. – Accessibility Compliance: Verify compliance with accessibility standards (e.g., WCAG) by involving testers with disabilities or accessibility needs to evaluate product accessibility features and usability for all users.
Wisdom of Crowds	Wisdom of Crowds refers to the collective intelligence or decision-making ability of a group of individuals when aggregated together, often outperforming the judgments of individual experts. It leverages diverse perspectives, opinions, and insights to make more accurate predictions, assessments, or evaluations.	– Prediction Markets: Harness collective wisdom to forecast future events, market trends, or election outcomes by aggregating individual predictions or bets from participants. – Crowdsourced Ratings: Aggregate user reviews, ratings, or recommendations to inform purchasing decisions, product evaluations, or service comparisons based on collective sentiment or consensus. – Group Problem-Solving: Tap into the collective problem-solving capabilities of teams or communities to generate solutions, ideas, or strategies for complex challenges or decision-making scenarios. – Crowdsourced Innovation: Crowdsource ideas, suggestions, or feedback from stakeholders, customers, or employees to drive innovation, product development, or process improvement initiatives by leveraging diverse insights and perspectives. – Opinion Aggregation: Pool together individual opinions, preferences, or judgments to form aggregated assessments, rankings, or prioritizations that reflect the collective wisdom of the crowd and inform decision-making processes.